Senator SHERRY (Tasmania—Minister Assisting on Deregulation and Public Sector Superannuation, Minister for Small Business and Minister Assisting the Minister for Tourism) (21:15): I am pleased to close this important second reading debate on the package of legislation to improve and modernise the governance arrangements for the main Commonwealth civilian and military super schemes. I want to briefly go over the main purpose and features of the legislation. None of the bills change the design of the civilian and military super schemes or member entitlements. Each civilian and military superannuation scheme will remain separate and continue to have its own benefits and entitlements as set out in its enabling legislation. For example, the military schemes will maintain their own legislative base and existing features and benefits that reflect the unique nature of service in the Defence Force such as death and disability arrangements.

The Governance of Australian Govern­ment Superannuation Schemes Bill 2011, the governance bill, seeks to improve the level of member benefit service levels and governance of the main civilian and military superannuation schemes by establishing the Commonwealth Superannuation Corporation as the single trustee for these schemes. CSC will be formed from a merger of the existing trustees for these schemes. The consolidation will enable CSC to pool all the civilian and military funds under its management to access increased benefits of investment scale. Industry experience suggests that the members of the Military Superannuation and Benefits Scheme have the most to gain from such pooling due to the small size of its fund relative to the civilian funds. For example, it is estimated that a half a per cent increase in the net investment return for a member of the RAAF who joins as an officer cadet and rises through the ranks to group captain at retirement would lead to an increase in the superannuation benefit of $95,000 over a full career or $41,000 over 10 years of service. There would be benefits, but of a smaller order, to members of the Commonwealth's main civilian superannuation schemes.

The governance bill incorporates a number of suggestions from ex-service organisations that are aimed at protecting the unique nature of military service. This includes a requirement for CSC to have regard to the unique nature of military service, as set out in the relevant military superannuation legislation, when it is performing a function under that legislation. CSC will have a governing board that includes representation of both civilian and military interests. However, each director of the CSC board, regardless of whether they have been nominated by the Minister for Finance and Deregulation, the Chief of the Defence Force or the president of the Australian Council of Trade Unions, will have an overriding obligation to act in the best interests of all scheme members. In order to further protect the interests of members of military schemes, at least one director nominated by the CDF is required to be present when the governing board is considering a matter related solely to these schemes.

The ComSuper Bill 2011 makes comple­mentary reforms to the governance structure of ComSuper that are aimed at improving superannuation administration for the benefit of current and former members. In particular, the ComSuper Bill establishes ComSuper as a statutory agency for the purposes of the Public Service Act 1999, consisting of a chief executive officer and staff. ComSuper will be a prescribed agency for the purposes of the Financial Management and Account­ability Act 1997.

The Superannuation Legislation (Consequential Amendments and Trans­itional Provisions) Bill 2011, the conse­quentials bill, supports the reforms in the governance bill and the ComSuper bill by making consequential amendments to a range of other Commonwealth acts and puts in place required transitional arrangements. An important consequential amendment has been made to the Defence Force Retirement and Death Benefits Act 1973 to strengthen recognition of the unique nature of military service by mandating the establishment of a Defence Force case assessment panel. The panel will have military representation, including representation nominated by the chiefs of each of the three services. The chair of the panel will be one of the directors of the CSC who was nominated by the CDF. The consequentials bill also amends the Superannuation Act 2005 to facilitate public sector employees being able to consolidate their savings under the management of one trustee.

Overall, the package of bills reflects the government's ongoing commitment to provide efficient and sustainable super­annuation arrangements for Commonwealth employees and military personnel, and to protect these features of military super­annuation that recognise that military service is unique and different from civilian employment.

The critique in this debate is reflected in the amendments but the focus in the debate has been on the nomination of the trustees. A longstanding rule was established when we passed the Superannuation Industry (Super­vision) Act 1993. I was actually in the parliament when we passed the legislation. In fact, I was a member and chair of the Senate Select Committee on Superannuation which dealt with the legislation and I was involved in some of the design features. Section 10 of the SI(S) Act, on page 17, has a very important principle—that is, equal employee and employer representation. Employee and employer trustees are nom­inated by the respective organisations. This is true of industry superannuation funds. Some are fond of criticising these as union funds, which they are not; they are industry funds. They are multi-employer funds with equal trustee representation, usually nominated by employer and employee or trade union organisations, with a two-thirds voting rule. It is also true of corporate superannuation funds. It is true of all APRA regulated funds and the SI(S) Act applies to them all in this regard. It is a very important principle.

The opposition are arguing that the Minister for Finance and Deregulation should appoint the considerable majority of trustees. That is what the opposition are arguing and they are wrong. It is wrong in principle and it is contrary to the spirit of the SI(S) Act. It is contrary to the equal representation rule that we have in this country, which, despite some of the criticism from those opposite, has worked overwhelmingly in the best interests of members. The equal representation rule and the two-thirds voting rule are absolutely critical. Without further comment, I urge the Senate to pass the legislation without amendment. Question put: